China’s coal demand is
becoming more price elastic
Paul J. Burkea and Hua Liaob
a Australian
National University (ANU)
b Beijing Institute of Technology (BIT)
ANU, 12 February 2014
[email protected]
@pburke_ec
Sources of China’s energy-based
CO2 emissions
7000
Coal
million tonnes CO2
6000
Oil
Natural gas
5000
4000
3000
2000
1000
0
1971
Source: IEA
1981
1991
2001
2011
2
Questions
1. What is the price
elasticity of demand for
coal in China?
2. Has this elasticity
changed over time?
Picture: http://blogg.nhh.no/reconhub/?p=1868
3
Approach
Use panel of provincial data for
period 1998-2012
Sample of 379 observations (30 provinces; 15 years; some
missing)
Fixed effects estimation, with numerous controls
Price measure: output price index for the “mining and
washing of coal” in each province (in real terms; deflated by
industrial producer price index)
Caveat: Data are not perfect
Picture: http://ceo.ca/coal-to-surpass-oil-as-top-global-fuel-by-2020-wood-mackenzie/
4
Answers
Price elasticity of demand
now in range -0.4 to -0.8
Has ↑ed over time (in absolute
value)
Appears partly to be driven by
marketisation
Picture: http://thetransitpass.wordpress.com/2009/10/30/electric-cars-bad-for-our-health/coal-miner/
5
Implications of removing subsidies
IEA estimates China’s coal consumption
subsidies = $13 billion per annum
We calculate that the removal of these
subsidies would result in a 2% ↓ in coal use
and related emissions
Picture: http://www.etftrends.com/2012/05/currency-etfs-chinese-yuan/
6
Implications for emissions pricing
China currently piloting ETSs,
considering carbon tax
For pricing schemes to function
properly in terms of reducing emissions, it is
important that coal use is responsive to coal prices
↑ing price elasticity of coal demand
=> China becoming increasingly suitable for pricebased instruments
Picture: http://www.brookings.edu/research/commentary?topic=Tax%20Reform/
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Thank you –
comments very
welcome
Paul J. Burke
Crawford School of Public Policy
Australian National University
[email protected]
@pburke_ec
Picture: http://2ndgreenrevolution.com/2011/11/30/chinese-power-plants-fined-for-sulfur-pollution-false-data/
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